No Cost-Free Climate Control
The EPA says its rules could deep-six new coal plants — but would have no economic impact.

EPA official Gina McCarthy speaks at The Climate Center.


Jonathan H. Adler

On Friday, the Environmental Protection Agency proposed new regulations limiting carbon dioxide emissions from power plants. If finalized, this regulation will, in effect, bar the construction of new coal-fired power plants unless they use costly carbon-capture technology. It is the latest in a series of EPA regulations governing greenhouse gases that the Supreme Court triggered with its decision in Massachusetts v. EPA. Still more regulations are on the way.

The EPA’s proposed rule would require both natural-gas and coal-fired power plants to meet stringent new limits — limits that most new natural-gas plants can meet, but that are not (yet) met by any coal-fired plant in regular operation. Specifically, the regulation would limit CO2 emissions from power plants to between 1,100 and 1,000 pounds per megawatt-hour (lbs/MWh), depending on the size of the plant and method of emission monitoring. This is an easy standard for state-of-the-art gas plants to meet; coal, not so much. Right now, the average U.S. coal plant emits over 1,700 lbs CO2/MWh. The average natural-gas plant, on the other hand, emits around 850 lbs CO2/MWh.

In proposing the new rule, the EPA is trying to have its cake and eat it too, proclaiming that the rule represents an important step in the control of greenhouse-gas emissions while simultaneously promising that the rule will have no meaningful economic impact. Based on current economic trends, the EPA projects that most new power-plant capacity built in the next decade will be from natural gas or renewable fuels, rather than coal. In other words, by this logic, the rule is redundant. Yet if the rule does not impose any costs, it also will not reduce emissions much, either. As summarized in the EPA’s Regulatory Impact Analysis:

The EPA anticipates that the proposed EGU New Source GHG Standards will result in negligible CO2 emission changes, energy impacts, quantified benefits, costs, and economic impacts by 2022. Accordingly, the EPA also does not anticipate this rule will have any impacts on the price of electricity, employment or labor markets, or the US economy.

What then could be the benefit of the rule? According to the EPA, should market conditions change, the rule could prevent the construction of high-emitting coal plants. As a consequence, the EPA suggests, the rule will encourage investment in carbon-capture and sequestration technology that could enable coal-fired plants to comply with the rule. Of course, if the rule could prevent the construction of coal-fired plants, then it could have economic costs. The EPA cannot have it both ways.